Tennessee Gas Pipeline Company

FIFTH REVISED VOLUME NO. 1

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Effective Date: 02/16/2003, Docket: GT02- 35-005, Status: Effective

2nd Sub Eighth Revised Sheet No. 405 2nd Sub Eighth Revised Sheet No. 405 : Effective

Superseding: Seventh Revised Sheet No. 405

 

GENERAL TERMS AND CONDITIONS (continued)

 

 

(c) Shipper is required to provide written notice to Transporter

within two days of filing a report (other than an annual or

quarterly report) with the Securities and Exchange Commission

("SEC") or other equivalent foreign regulatory body that Shipper

is required to file as a result of a material event or corporate

change affecting its financial condition. Such notice shall

include a general description of the nature and reason for the

filing and to the extent such report is not available

electronically, Shipper shall provide Transporter with a copy of

the report. Shippers that are not subject to SEC reporting

requirements, but have a parent that is, shall comply with

respect to any such filing by their parent.

 

(d) Shipper shall provide a list of owners and/or shareholders of

entity, if privately held.

 

4.3 Criteria for Creditworthiness Determination

 

Acceptance of a Shipper's request for service and the continuation of

service are contingent upon the Shipper satisfying, on an on-going basis,

a credit appraisal by Transporter.

 

Transporter shall apply consistent evaluation practices to all similarly

situated Shippers to determine the Shipper's financial ability to satisfy

the payment obligations due to Transporter over the term of the requested

service agreement.

 

A shipper will be deemed creditworthy if (i) its long-term unsecured debt

securities are rated at least BBB by Standard & Poor's Corporation

("S&P") or Baa2 by Moody's Investor Service ("Moody's") and (ii)

Shipper's short term and long term outlook opinion is Stable or Positive

from S&P or Moody's and (iii) the net present value of the sum of

reservation fees, utilization fees and any other associated fees, for the

contract term is less than 15% of Shipper's tangible net worth. As used

herein, tangible net worth shall be the sum of the capital stock, paid-in

capital in excess of par or stated value, and other free and clear equity

reserve accounts less goodwill, patents, unamortized loan costs or

restructuring costs and other intangible assets. In the event Shipper is

rated by multiple agencies, the lower rating applies. A Shipper that is

not rated by S&P or Moody's may use its parent's rating if a guarantee

acceptable to Transporter is provided. If the Shipper has multiple

service agreements with Transporter, then the total of all such service

agreements shall be considered in determining creditworthiness.

 

If Shipper does not meet the criteria described above then Shipper may

have the Transporter evaluate its creditworthiness based upon the level

of service requested. Such credit appraisal shall be based upon

Transporter's evaluation of the following information and credit

criteria:

 

(a) S&P and Moody's opinions, watch alerts, and rating actions will

be considered in determining creditworthiness.

(b) Consistent financial statement analysis will be applied by

Transporter to determine the acceptability of Shipper's current

and future financial strength. Shipper's balance sheets, income

statements, cash flow statements and auditor's notes will be

analyzed along with key ratios and trends regarding liquidity,

asset management, debt management, debt coverage, capital

structure, operational efficiency and profitability.

(c) Results of bank and trade reference checks and credit reports

must demonstrate that a Shipper is paying its obligations in a

timely manner.